Clare Moffat, head of intermediary development and technical at Royal London, comments on today’s (19 August) Supreme Court Judgement in the long running Staveley case.
“The Supreme Court decision in the Staveley case has clarified that intention is crucial when a pension transfer or switch is made in terminal ill health. Where there is an intention to give benefits which didn’t exist before, such as a DB to DC transfer, it will be subject to IHT. But a discretionary DC to DC switch may be completed without worry of IHT if it is for genuine commercial reasons and the beneficiaries on the expression of wish form stay the same. As always, financial advice is key”.
Notes to Editors
The Commissioners for Her Majesty's Revenue and Customs v Parry & Ors, otherwise known as the Staveley case was first heard in 2014. It is based on whether inheritance tax should be applied to a pension transfer carried out in terminal ill-health.
After a difficult divorce Ms Staveley transferred part of a pension she had set up with her husband into a new pot and bequeathed it to her children. She died just weeks later.
Because she was terminally ill, HMRC treated the transfer as a "transfer of value" followed by an "omission to act" as she did not draw any benefits, and applied IHT. It argued the two actions were linked and designed to reduce the value of her estate for IHT purposes. It has since been through the Upper Tribunal and Court of Appeal before being referred to the Supreme Court.
By a majority, the Supreme Court partially allowed the appeal, holding that the omission gave rise to a charge to inheritance tax, but the transfer did not.
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About Royal London:
Royal London is the largest mutual life insurance, pensions and investment company in the UK, with assets under management of £139 billion, 8.6 million policies in force and 4,348 employees. Figures quoted are as at 30 June 2020.